Regime Change Not Bullish for Oil Production in the Middle East

If the Western military intervention in Libya is really being driven by oil, maybe it's time to think again. History says regime change is never bullish for oil production in the Middle East and even less so for oil exports.

Iran and Iraq, two of the larger producers in the region, are cases in point.

While no one misses the Shah's regime, Iran and the rest of the world still miss the oil production and the oil exports his regime once produced. At the height of the Shah's power, Iran was pumping out six million barrels a day. Today, 32 years after the Iranian revolution sent Shah Mohammad Reza Pahlavi and his cronies packing, Iran barely produces four million barrels a day.

Exports have fallen even more than production. During the Shah's reign, Iran consumed less than a million barrels a day, leaving over five million barrels for daily export. Today, thanks to decades of massive fuel price subsidies, domestic oil consumption has almost doubled, leaving only two million barrels a day for export -- or 40% of the export volumes prior to the Iranian revolution.

Iraq's experience should give Western allies no more confidence in their Libyan mission than the Iranian one. Prior to the invasion of Kuwait and the trade sanctions it triggered, Saddam Hussein's Iraq produced around three million barrels a day in the late-1980s. Since then, oil production has never been close to that level.

When the Americans invaded Iraq in 2003, the U.S. Department of Energy confidently predicted the country would be throwing its arms open to foreign investment and the oil sector would be producing over four million barrels per day by 2010. Instead, the Sunni insurgency broke out and a whole lot of pipelines (and people) started getting blown up. Oil production plunged, and it has taken almost a decade to get production back to pre-invasion two and a half million pace.

What will happen in Libya is still anyone's guess. Will a defeated Muammar Gadhafi try to blow up the oil fields like Saddam Hussein did on his forced retreat from Kuwait? Will oil production and oil installations simply collapse as collateral damage in a protracted civil war that partitions the country? Or will a new regime take over and prove to be as dysfunctional as its predecessor or less inclined to develop the country's oil reserves? Whatever happens, both the Iranian and Iraqi experience suggest a post -Gadhafi Libya will produce less, not more, oil.

Of course, maybe the missing 1.3 million barrels of oil exports from the country have nothing to do with why we are in Libya. Maybe it is just a humanitarian mission after all. But if protecting defenseless populations from Middle Eastern dictators is what this is all about, why aren't we intervening in Bahrain, Yemen and Syria as well?